Reorganizing debt through Chapter 13

Filing for Chapter 13 allows you to organize a repayment plan with creditors and begin a fresh financial start.

Millions of Americans are faced with medical expenses, credit card debt, mortgages, car payments, payday loans and a number of other forms of debt. For some, the amount of debt is overwhelming and they may begin to consider debt relief options as a way to gain financial freedom from their expense burdens. Chapter 13 is one form of bankruptcy that allows people to reorganize their debt and begin a fresh financial start once their debt is finally paid off. Through Chapter 13, people who face foreclosure or property repossession are often able to keep their homes and develop a repayment schedule that best fits their needs.

Credit counseling

Before people can file for Chapter 13, they must complete a credit counseling course within 180 days prior to filing. During this course, debtors can learn to develop a budget that fits their household income, and limit their spending to within that budget. Debtors also learn what filing for Chapter 13 bankruptcy entails, and how it can help them repay their expenses and ultimately discharge their debt.

Creating a payment plan

According to U.S. Courts, debtors will have three years to pay off their debt. In some cases, however, they may have up to five years if their certain circumstances are involved. Debtors can often work with creditors to develop a payment plan that will allow them to repay the debt in this time period. Some creditors will reduce the debt amount, decrease interest rates and lower monthly payments in order to facilitate the debtor's payments.

Chapter 13 confirmation hearing

After the initial paperwork has been submitted, the trustee appointed to the case will schedule a meeting of creditors. This gives all creditors involved in the case a chance to ask questions and discuss the terms of the bankruptcy. The trustee will also ensure that the debtor understands what filing for Chapter 13 means and how it will affect their life. After that, a Chapter 13 plan and confirmation hearing takes place, where the court reviews the debtor's reorganization and debt repayment plan. The trustee will either approve the plan or ask for modifications. Approximately 30 days after the case is filed, the debtor must begin making payments to the trustee.

Getting back on your feet

Filing for Chapter 13 can often seem overwhelming. By contacting an attorney who has experience handling bankruptcy cases, you may be able to help ease some of the anxiety associated with the bankruptcy process. An attorney can guide you in the right direction and ensure you are filing the proper paperwork.